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  • Contributions to an unfunded defined benefit fund

    In an unfunded defined benefit fund your benefits are not financed until just before they become payable to you. The benefits are generally paid by your employer.

    Unfunded defined benefit funds mostly cover government employees – for example, the Commonwealth Superannuation Scheme (CSS), Public Superannuation Scheme (PSS) and the Defence Force Retirement and Death Benefits Scheme (DFRDB). Many unfunded super funds also have funded components (these are known as partially unfunded).

    Concessional contributions

    Concessional contributions count towards your concessional contributions cap.

    These contributions on their own cannot result in you exceeding your concessional contributions cap for a financial year ($25,000 in 2017–18).

    Counting unfunded defined benefit fund contributions towards your concessional contributions cap means that your ability to make further concessional contributions to other funds is limited. There may be tax consequences for your other concessional contributions.

    Non-concessional contributions

    Non-concessional contributions made to an unfunded defined benefit fund are counted towards your non-concessional contributions cap.

    Some unfunded defined benefit funds require you to contribute a percentage of your salary to your super. These contributions are made from after-tax income, so they are non-concessional contributions.

    Example

    Jane is a PSS member. She makes after-tax contributions of $7,000 in the 2016–17 financial year. She makes further after-tax contributions of $445,000 to another super fund.

    As Jane is under 65 years old, she can 'bring forward' two years of contributions, giving her a non-concessional contributions cap for the 2016–17 year of $450,000.

    Her non-concessional contributions total $452,000 as it includes both the:

    • $7,000 contributed to the PSS
    • $445,000 made to the other super fund.

    Therefore, Jane exceeded her non-concessional contributions cap by $2,000 and has to pay excess non-concessional contributions tax on this amount. Jane's available cap for the next two years is $0.

    End of example
      Last modified: 26 Sep 2018QC 20481